My wife and I are both in our late 60's. I am retired and have a large 401k accumulation which is sufficient for our life style. We have over the years accumulated a large amount in investments and CDs.
We have one daughter who is married and involved in starting a new business. We have the money to either give or loan a large amount to her and her husband to assist in the new business. Since we can only give $12k each to each of them we have a limit of $48k per year we can give. They need much more than that in a short time.
My question is would we be better to give them the money and use our lifetime gift exemption which is subsequently reduced from our estate exemption, or would we be better to use a loan and pay income tax on the interest they would pay us. We could also forgive the loan at the rate of $48K per year or forgive the interest at the same annual rate, but in either case, we pay income tax on the required interest.
Any suggestions!
Thanks

Mon Mar 27, 2006 8:13 pm

JBendarSenior Member

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Re: Gift or loan.

quote:Originally posted by JACOBDAVMy wife and I are both in our late 60's. I am retired and have a large 401k accumulation which is sufficient for our life style. We have over the years accumulated a large amount in investments and CDs.
We have one daughter who is married and involved in starting a new business. We have the money to either give or loan a large amount to her and her husband to assist in the new business. Since we can only give $12k each to each of them we have a limit of $48k per year we can give. They need much more than that in a short time.
My question is would we be better to give them the money and use our lifetime gift exemption which is subsequently reduced from our estate exemption, or would we be better to use a loan and pay income tax on the interest they would pay us. We could also forgive the loan at the rate of $48K per year or forgive the interest at the same annual rate, but in either case, we pay income tax on the required interest.
Any suggestions!
Thanks

After reading this publication, you can ask more detailed questions. Personal income taxes is what is in my area of expertise. If you still are having trouble figuring out what to do, after reading about your limitations, send me a private message. I will try to do some research for you or get you the answer. Good luck with your situation!